Sellers using the Fullfilment by Amazon (FBA) model need to adapt to the limits of stock held in the e-commerce giant’s warehouses. In May 2021, it was announced that a new maximum limit of 500 index points was being introduced. It refers to the stock index and is intended to help manage inventory effectively.
The index, IPI in English (Inventory Performance Index) and LBI in German (Lagerbestandindex), was introduced to ensure that only good rotating goods are stored in warehouses. Amazon wants to prevent sellers in the FBA model from shipping products that have been sitting there for months. How do I check the current limits on my seller account? Go to Inventory – Inventory Planning – Performance (Lagerbestand > Lagerbestandsplanung > Verkäuferleistung) and check what value between 0 and 1000 the index is for your inventory. The IPI is recalculated on a weekly basis. It is influenced by several factors, including:
– possible surplus in stock (Excess inventory/Überbestand) – the amount of unsold goods that will remain there for the next period;
– probability of quick sale (Sell-through/Durchverkauf);
– problems with listings (e.g. inactive, incomplete, blocked offers) (Stranded inventory/Lagerbestand ohne aktive Angebote);
– replenishment rate (In-stock inventory/Vorrätiger Lagerbestand).
The more goods that are left on the shelves for a long time, the worse the IPI. The space available for storage can then be reduced. You should not only take care of rotation, but also ensure that every product has a description and pictures according to Amazon guidelines. Also avoid any downtime in shipping to the warehouse.
The value of this index is available on the Performance page in Inventory.
Fig. 1 Performance
There you can check not only what the IPI is and how it has changed over the week. On this page you will also find detailed information on the four factors discussed earlier that have a key influence on the assessment of your inventory. In addition, there are two drop-down tabs at the bottom of the page:
– Restock limits/Auffüllbeschränkungen – here you can find information on the available limits for specific types of goods;
– Storage volume/Lagervolumen – shows the current use of storage space.
Fig. 2 Storage limits for various types of goods
In this case, the account is relatively new. Not all the necessary data is available, so the limits are high. Once they have been set and you have reached the maximum value, you will not be able to make new shipments until some of the goods stored in Amazon’s warehouse have been sold. Then space will be freed up for more shipments.
As of July 1, 2021, new limit rules apply. If your IPI was less than 500 between May 21 and June 21, your FBA inventory limit valid for a quarter will apply from the following month. Amazon has tightened the rules here, as previously dropping below the 450 threshold meant restrictions were triggered. What can you do to avoid lowering your available space?
1) Review which products may be impacting low IPI – identify those that are out of stock due to lack of availability or listing errors.
2) Sell off or liquidate non-returning items to make room for those that are selling well.
3) Optimise your deliveries by sending stock to the giant’s warehouses so that it will quickly disappear. In the case of less popular products, reduce their quantity to gain more space.
This is the easiest way to avoid problems with under-stocking. Keep in mind that in the FBA model, Amazon primarily promotes listings that are most popular with customers. These are therefore the most frequently purchased and best rated products.
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